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BlackBerry earnings top expectations on software; shares rally

TORONTO - BlackBerry on Friday reported a smaller quarterly loss and its first quarter-to-quarter rise in revenue in over two years, sending its stock soaring as much as 12.6 percent, as its pivot to software begun to bear fruit.

TORONTO - BlackBerry on Friday reported a smaller quarterly loss and its first quarter-to-quarter rise in revenue in over two years, sending its stock soaring as much as 12.6 percent, as its pivot to software begun to bear fruit.

Significantly, gains in software revenue more than offset a steepening decline in legacy system access fees for the first time, and the Waterloo, Ontario-based company said the trend should continue.

BlackBerry has staked its turnaround on software and more aggressively licensing its trove of patents after its once-dominant handsets conceded the consumer smartphone market.

"BlackBerry hit a software number that investors have been looking for them to hit for quite some time," said Morningstar analyst Brian Colello. "I think the investment in security, in software, is the right move."

The better-than-expected results were driven by a sharp jump in software and patent licensing revenues and signs that the struggling handset unit could hit breakeven in the current quarter.

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BlackBerry shares were up 11.2 percent to $8.68 in New York and rose as high as $$8.78. It rose 10.6 percent to C$12.04 in Toronto by early afternoon.

"We have about 44,000 patents that are very active, very relevant, and so we're going to take advantage of that and generate more momentum there," Chief Executive Officer John Chen said in an interview with CNBC television.

The company booked $53 million in intellectual property licensing revenue after closing a number of agreements in the quarter.

In the quarter ended Nov. 28, BlackBerry reported a loss of $89 million, or 17 cents a share. That compared with a year ago loss of $148 million, or 28 cents a share.

Excluding restructuring charges and other one-time items, the company posted a loss of $15 million, or 3 cents a share.

Quarterly revenue fell 31 percent to $548 million from a year earlier, but rose 12 percent from the prior quarter, after nine consecutive quarters of declines.

Analysts, on average, expected BlackBerry to post a loss of 14 cents a share on revenue of $489 million.

Software revenue, a metric being closely watched by analysts as BlackBerry pivots to focus on that segment, more than doubled to $162 million from a year earlier.

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The result helps put the company within striking range of its $500 million target for the fiscal year ending Feb. 29, 2016.

Smartphone sales also rose for the first time in four quarters to $214 million from $201 million in the second quarter as the company began shipping the Priv, its first device powered by Alphabet Inc's Google Android operating system.

It sold 700,000 devices, down from about 800,000 in the prior period, but average selling prices jumped to $315 from $240.

On a conference call with analysts, Chen said he expects BlackBerry to beat Wall Street expectations for the current quarter.

(Editing by Jeffrey Benkoe)

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